Wall St. opened higher after solid gains yesterday, keying on a rebound in retail sales after a moribund April. The dollar is rebounding after recent losses, pulling the euro back to 1.12.
Crude oil has given up most of yesterday's gains after Saudi Arabia signaled that it would consider increasing production if "demand rose," (aka "if prices increased to the point where U.S. shale drillers could make a profit.)
Yesterday in the Markets
It was an exciting day on Wall St., as the DJIA was up over 250 points briefly. Stocks were helped by bargain hunting after the drubbing that shares had taken this week, and rising bond yields lifting the financial sector. The Dow closed a fraction of a point over 18,000 up 236 points, lifting the index back into positive territory for the year. The S&P 500 regained the 2100 mark, gaining 1.2%. The Nasdaq gained 1.25%.
The World Bank joined the IMF yesterday, to beg the Fed not to raise rates until next year. But if bond yields keep spiking the way that they are, the Fed has no choice but to raise benchmark rates to keep up.
Speaking of bonds, the 10-year T-note sank again yesterday, driving the yield to 2.49%, a new high for the year. The 10-year Treasury has lost investors 5.7% so far in 2015. The German 10-year bund saw its yield spike above 1% yesterday, before settling at 0.98%, the highest point since last September.
"Bond King" Bill Gross of Janus Capital made waves yesterday afternoon with the following tweet:
"QEs worldwide supporting financial assets. ECB + BOJ each $1 trillion+. US Corp buybacks $1 trillion+ as well; China too. What happens when it stops?"
The dollar lost 6/10th of a percent against a basket of currencies yesterday, closing at 94.6. The Euro gained to 1.13 against the dollar.
Oil futures ended another rollercoaster day on a good note, with West Texas Intermediate up $1 a barrel, to close at $61.15, a 1.68% gain. Brent crude was up 1.1%, gaining 72 cents to $65.68.
Between a dropping dollar and a bond meltdown, gold saw good safe haven demand for a third day of gains. It bumped up against resistance at $1,191 before closing up $9.20 to $1185.60. Silver regained the $16 mark, closing up 7 cents to $16.01 after bumping up against the resistance level of $16.19. Platinum saw moderate gains, up $8 to $1,113, while palladium stabilized, gaining $2 to close at $742.
Factors Affecting Gold Today
The dollar snapped its losing streak today, but the main pressure on gold seems to be coming from stocks, which are moderately higher after yesterday's gains.
First-time jobless claims came in a bit higher than expected, rising 2,000 applications to show 279,000 people were fired last week. Analysts had expected that number to be 275,000. Wall St. preferred to look at retail sales this morning, which rose 1.2% from 0.2% in April.
The 10-year Treasury note has recovered some the ground it lost yesterday, with yields falling 3 basis points. The German 10-year note is still bleeding out over the games being played over the Greek bailout, with the yield now over 1%. It was only in April that the yield on the 10-year German bund was 0.05%.
Speaking of the Greek bailout, which has devolved into a mixture of Greek tragedy and Kabuki theater, leftist Greek prime minister Alexi Tsipras was unsuccessful in his latest attempt to do an end-around past Greece's creditors by appealing directly to German chancellor Merkel and French president Hollande again. EU officials are increasingly public in their displeasure over the Greeks playing to public opinion instead of negotiating seriously, for example, submitting a three-page document for their bailout plan. European Council president Donald Tusk gave Tsipras a blunt warning in a press conference:
"There is no more time for gambling. The day is coming, I'm afraid, that someone says that the game is over. It is very obvious that we need decisions, not negotiations," he said
The IMF's negotiating team left Brussels in frustration this morning, after the Greeks refused to budge on their election pledge to roll back austerity measures and give an income hike to one of the most lavish pension systems in Europe.
Besides both sides scrambling to blame the other in the event of a Grexit, the markets will be watching industrial production reports from the EU, and wholesale prices and consumer sentiment in the U.S.